Abstract Objective: To analyze the achievements, issues and policy recommendations for implementing essential medicine system in China after a 3-year effort. Methods: Policy documents analysis and Literature reviews are conducted. Results: From 2009-2011, a series of national essential medicine (EM) policies has been established which contain EM list, organizing production, quality assurance, pricing, tendering and procurement, distribution, rational use, monitoring and evaluation, etc. About 98.8% government-run primary healthcare institutions and 41.5% village health posts are conducting zero-mark-up policy while buying EMs. The average cost per visit, per admission, and per description in outpatient and inpatient departments has declined. The Issues with the national EM list cannot meet the requirements of clinical practice at the local level, all provinces have to increase additional 64-455 EMs in their local supplementary list; the limitation of EML in primary healthcare institutions causes patients to transfer directly to secondary or tertiary hospitals to search appropriate treatment; there is no defined regulation or legislation regarding the responsibility and accountability of government to compensate for the financial loss after implementing a zero mark-up policy in primary healthcare institutions. In the future, some innovative reform should be taken into account, such as revising EML, quality assurance, control margins within the distribution system, differential pricing and internal reference-based pricing, waive taxes and import duties of EMs, and separation between prescribing and dispensing in public hospital reform. Conclusions: Establishing a national essential medicine system is a difficult task to accomplish. The role of the zero-mark-up policy of EMs is to cut off the economic profit chain among different stakeholders. Using pharmaceutical profit to subsidize hospital revenue will be gradually eliminated in China.